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tv   Your Bottom Line  CNN  October 22, 2011 9:30am-10:00am EDT

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it might be an ugly game. >> could be, but i'm talking the field could be nasty. >> it's going to be ugly. >> really bad. going from that one possibly to -- >> i'll take michigan state. >> really? >> i will. >> i am going with the spartans, we'll wrap it quickly with stanford and washington. >> i'll take washington. >> really? i'm going to go stanford. >> all right, we'll be back. top of the hour, enjoy. at age 4 a child living below the poverty line is a year and a half behind in academic ability, how do we close that gap? good morning, i'm christine romans, and high school, and college and a career, a high school is offering all of the above to tech savvy kids, but is it working? plus, the top five money mistakes that are needlessly costing you thousands of dollars. but a stunning number surfaced this week as 16 million americans are out of work, the economy is struggling to grow
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and the housing market remains a mess, we learn that total student loan debt now topping $1 trillion for the first time. at the same time, 15% of 20 to 24-year-old americans do not have jobs. student loan delinquencies have jumped to more than 11% doubling just over the past few years. nicholas kristof is a columnist for "the new york times," moody's expects student loan problems to only get worse. this is a really tough situation for young people. no jobs, tons of debt, an economy that's not favoring the things it used to. >> that's right. and i fear that the result may be, you know, more people having trouble getting into college and one of the long-term problems affecting our long-term competitive is the proportion of americans going to college has flattened since the 1970s, i fear we're kind of digging ourselves into a hole. >> the thing is even if you get a college degree and you get the debt it slows down your ability in some cases to get married because you are trying to dig out of debt. it slows your ability to buy a
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home and start home ownership. there's a lot of other economic factors that follow-on from all of this debt. >> yeah, and frankly i think the whole economic model for tertiary education is broken, that costs have risen so much over the last few decades that people are being priced out of the market in a way that i think undermines what a college education is about. >> it certainly feels like a bubble, but the bubble hasn't popped yet and that's what frustrating because american families keep digging deeper to try to pay it for it. i want to bring in sal konn, kids are graduating it's almost like they need to be a money manager on top of the degree they get. how do you reconcile the value of a college education with all of the debt that students are taking on? there's no room for error here for kids. >> i think the unfortunate thing is you can't reconcile the value of the college education with that level of debt, i think, you know, for better, for worse, we've fallen into the situation where a lot of students view college as a magical end point, if you get a college degree, you
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will have this great white collar job and be able to get a mortgage and a house and all of those things, and the reality is you're not. what you have -- when everyone views college as an end point, you have more and more people getting degrees but to employers it's less and less of a strong signal and you add that with the fact that you have a ton of more debt and actually college is making it harder for people to kind of build their foundation for their lives. >> i'm not the first person to say that, but you look at the way student loan debt has grown and also the way delinquencies are starting to grow and they see a bubble. a subprime-type bubble. it can't go on like this, can it? >> no. and scary thing is, and unfortunately i don't think a lot of students are aware of this, but student debt is one of the few debts that is not cancellable by bankruptcy, it's almost a form of indenture ed servitude at some level. you have to pay it back. >> i want to talk about the earlier end of the education system, because before you can
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get to all of this debt and going to college you have to get through the public school sys m system. earlier this week president obama met with early education program teachers and teacher training at a community college in north carolina and he was stressing the link between early education and success later in life. this is what he told those folks. he said, how well we do as a country will depend on how well we train our young people and it starts early. nick, you were at harvard talking to early childhood education experts this week. what are folks talking about there in the new era of budget tightening about the importance of spending money on the front end? >> well, i think one point everybody makes is that there are no quick fixes in education. but the point that comes up over and over is that if you want to get more people in college, if you want to get more people graduating from high school, then the solutions aren't necessarily in the high schools or even in the middle schools, but they may be in early childhood education, that is the area where you get the most bang for the buck when you work with 4-year-olds, for example, so that they don't start off behind the starting line. >> you know, it's so interesting
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because one of the statistics from the department of ed is that a child who lives in poverty will have maybe 3,000 words, 4,000 words by grade three. a child who is middle-class will have 12,000 words. i mean, that gap is huge if you don't address it. >> and it's not just an issue with fairness, although that is indeed part of it, but it's also a broader question of these are inve investments and there's some education by james heckman the nobel-prize winning economist who has argued this that investing in early childhood education pays for itself, fewer health expenses, fewer people on public support, less crime, this kind of thing. and, boy -- >> that's a political argument that starts to get really difficult right now, because there are some people that say investment, other people say it's unnecessary spending, that's a nanny state, that is the way the political discourse is going. >> yes, frankly until recently the data was somewhat ambiguous on some of these, but now we're
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getting more and more data that is really good, kids who are, you know, randomly assigned to early childhood education and those who aren't and those who do do so much better, so much better life outcomes. the question is not can we afford this, can we afford not to do it. >> sal, you are trying to make a career by closing the achievement gap by tutoring, that's one of the things you guys do, but the gap is widening in the country between the haves and the have-nots, in all these categories, reading, math, general knowledge, school readiness rose with income, and research sos by age 10 that gap can still exist. how do you bridge it? >> yeah, i think -- i mean, i agree with what has been mentioned, but there's a reality that regardless of what we do, there is that gap, and i think unfortunately right now in a traditional model that gap just persists and students are just pushed ahead with their age groups. what we need is ways for students, whether they're in
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first grade or eighth grade or they're 17, that they can actually remediate and fill up the gaps instead of being pushed forward. and they're huge. you look at the number of students entering college have to take not even college algebra but remedial math, which tells you that they learned very little since sixth or seventh grade, and so the gaps keep building, building, building. part of the solution, i don't think there is one big solution, but part of it is to allow once a student is in sixth grade, seventh grade, eighth grade, to remediate and not being pushed forward so that they end up in college without learning math. >> you two, have a great weekend. saving for your retirement or your child's college tuition? it's a decision many parents have to make, but should they? and tastes simply delicious. for those of us with lactose intolerance... lactaid® milk. the original 100% lactose-free milk.
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they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪ so, i'm the proud mom of three little boys eight affectionately call them my three little cost centers because i have to raise them to the age of 18, it will cost $227,000, that's not my number, that's the usda, and paying for college will set you back at
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least another $20,000 per year for a four-year degree. now, add into that equation a down economy and it might feel like the perfect storm, but it doesn't have to as long as you have a plan, time is your best friend here, by the way. here now with me is kermen long ulrich, the author of "the real cost of living." i always feel i'm not saving enough. i'm terrified i'm not saving enough. >> you are justified to be terrified, because it's really, really scary. i've got one of my own, just one, and i'm a little scared. here's what helps us feel better. you don't have to save up for all of it. i don't want anyone to save up for all of it. if you can imagine the six figures for a four-year private college education. you have three kids -- >> i can't do that. i really can't do that. >> exactly. when you first just understand that you should not have to and you don't have to pay for all of it, that helps you with your planning. borrow a third or plan on borrowing a third. plan on -- which will keep your borrowing costs down by the way.
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>> your kid is doing that borrowing. >> your kid is doing that borrowing. also you can go for scholarship and grants for a third and then you can save up for a third. if you keep the borrowing to a third, too, that keeps you from doing what unfortunately a lot of folks have done just to get the degree and borrow way too much especially in comparison with what the entry-level jobs are paying. >> you don't want to borrow more money than that child will earn in the first few years out. >> we love our kids, but not every kid is set for a four-year private institution. you do have to think of it as an investment and in reality terms, how real is the prospect that this child will take this degree and run with it and go gangbusters and make it really worthwhile? do they need a little bit more time? can they start with a community college for a couple years until they figure out what they want to do, know your child and know what the expectations are and talk with them what their exp t expectations are. >> it's a popular conversation now to say mostly among pool who have degrees that the degree isn't worth it. i think the degree is worth it.
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>> it absolutely is worth it. >> and i think the debt is a good debt if you are not stupid about it. >> the scariest thing i'm hearing right now which terrifies me, the college degree is not worth it, because i'm unemployed. listen, across board if you look at the data, the country is going to require a college degree, like a high school degree, you really absolutely need the degree, but what are you going to do with it and how are you going to pay for it is really the important question. you got to tackle that, don't take out so many loans. >> what is the number one mistake that parents make? >> parents make a couple of big mistakes and one of them is that assumption, i got to save for the whole thing, not planning right in terms of which school you're going to go to, not spending the amount of time researching the school. i know a lot of kids and i was this kid saying i was going there, end of story, right ? but i figured out a way to pay for it. what scholarships and grants can we ged, go t. go to and if you want to grow the money go to
9:44 am a free site where you can compare all of them and their fees and start saving as soon as you can. >> finaid has an interesting rule of thumb, do not borrow more for college than the kid expects to earn in the first year working. a social worker 25 grand or an engineer that makes 80 grand, you can have a different kind of debt load. >> it can really help you plan in terms of where you're going to go because if you are thinking about 25 grand that actually won't even buy one year at a private school. you've got to plan it out and work it together as a family for this goal. >> you need to go to a state school or two years of a community college before going to a state school and work along. >> and work along and pay for it. >> what do you need to be aware of in terms of student loans? >> know what the best is, the golden grant in student loans is federal subsidized, when parents don't realize the difference, dub sized mean the government pays the interest while you are in school and the loan doesn't grow. too many kids get out and they
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don't pay deferments, and it was 20 and now it's 40, a subsidized prevents it from happening. federal loans give you the flexibility to not have to pay if you're unemployed and different ways, income repayment plan, but private loans are dangerous and very expensive. >> the minute you drop out, the good debt becomes bad debt, so it has to be -- >> keep at it. >> you have to keep your eye on the ball. carmen, nice to see you. thank you. the top five mistakes you're making right now that is costing you thousands of dollars, not attending the boring open enrollment seminar is one of them. [ man 2 ] yummy. i got that wrong didn't i? [ male announcer ] want great taste and whole grain oats that can help lower cholesterol? honey nut cheerios. new splenda® essentials™ no calorie sweetener with b vitamins, the first and only one to help support a healthy metabolism. three smart new ways to sweeten. same great taste. new splenda® essentials™.
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there are five big mistakes that could be costing you thousands of dollars right now. number one, not refinancing your mortgage if you can. number two, not budgeting. number three, not maxing out and rebalancing periodically that 401(k). also not appealing your property taxes. do you know that most people who appeal do get money back? it's on average something like $1,400 a year and you get one
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shot a year to get this one right, not paying attention to your health care open enrollment period. anna rueuben is the host of a radio program on sirius xm, if i don't go to open enrollment, i'll be paying more. >> absolutely. anyone who gets insurance directly through a company individually will be paying more, just assume it may look the same, but it's not the same. >> and it's different for everybody. they sit there and they can't give you any specificity because every individual, you know, pattern of consumption of health care is different. i mean, we look at premiums for employer-sponsored family health coverage, look at this, what part of it that the employer takes care of and what part you take care of, you're taking more and more of the cost on. >> absolutely. i get hundreds of questions on my radio show, but there's always a central theme here. it's always the employer shifting more of the increasing
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costs on to the employee, and there are steps you can take as the individual or as a family to make sure you're picking the right plan. the steps are all the same but the insurance products that are being offered are different. >> let's talk about the insurance products because it seems to me is that the push is towards health savings accounts, different than those flex spending accounts, companies are trying to get you, the consumer, to pay more. >> that's the big buzz word this year. basically what your employer is doing is saying, we're going to give you health insurance, but we're going to give you a plan with a high deductible and we're going to give you a little bit of cash that you can invest in your own on a health savings account. that difference from a flexible spending account in that the money rolls over every year and you can use that towards health care expenses. but there's a catch. you're paying the first dollars of your health savings consumer directed plan yourself.
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>> okay. so talk about some of the things when you're making these choices that you need to think about. if you choose incorrectly, it's costing you hundreds or thousands of dollars this year. >> employers want to put you in a plan for a health savings account. on average, most employees don't hit their deductible every year. what you want to do is make sure you add up your expenses from the previous year. that's always the first thing you should do. your individual expenses and your family's expenses. and to the best you can, try and predict the following years. do i have any surgeries coming up? are my kids getting older? am i getting older? do i run the risk of getting sick? more often than not, if the answer to any of those questions is maybe, then the dollars you're going to save with a lower premium and a consumer directed plan far outweigh what
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you'll end up spending if you pick that plan. >> so in general, if you're young and single and healthy, you think about the consumer directed plan, put money into an act that's going to carry over every year. >> these plans are for younger, healthier people. and they are also for people who can't afford the ppo option. they're more expensive for employers. each employer will weigh the price differently. look at the premium that you'll be paying for yourself or your family. but your ppo will always be more money. >> and a lot of people are sitting there and looking at their spouse or part nr's plan. i want to talk about prescriptions. what do you need to keep an eye on for prescriptions? >> big change this year. again, passing costs on to employees. a lot of employers are changing their formulary. that means they're pushing people into generic drugs. so the way they do that is a drug. if you're taking a drug every
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month, it is possible that that drug which used to be covered with ads 20 copay may fall into what's considered a nonformulary drug. that means the same drug you've been taking for so long may no longer be covered unless you get the generic. >> do you agree with my assessment, that it is a very painful four weeks every year, but it is so important to your family's finances? >> as you say, this is a very expensive time of year for a lot of people, picking this plan. and you want to get it right. it's worth the time and effort you put into it to choose the right plan. >> and if they have a cost estimator through the company you're working with, you should do it. >> one of my favorite things. go to your insurance website and you can put in what it's going to cost you to go to the doctor. >> thank you so much, andrew. how about an associate's degree with that high school diploma and a shot of a job in a lucrative field all at the same
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how would you like an associate's degree with that high school diploma? welcome to p-tech. it's part high school, part college with career experience. they can earn a high school diploma and an associate's degree in technology all for free. it's a collaboration of the new york board of ed, two colleges, as well. they shape these minds and prepare young people for a knowledge-base knowledge-based degree. last week, we tagged along. >> in this economy, a scholar shohlership can help save a lot of money. >> i'm a computer geek. i'm always on the xeert, 24-7. my mom read about p-tech and i saw what the program was about. two free years of college, an associate's degree and i was like, oh, my goodness, why not?
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>> today was my first meeting with richard. i was really impressed. she is extremely bright. she is intro speculative. she's creative. she's very mature. >> to being here today is that every single ninth grader who has prepared this event for ibm absolutely incredible. i wanted to make sure that early in the school year, there's a transition from middle school to high school. that context was set forestry by coming face-to-face with someone who works in the industry and that way they can say, well, this is why math is important. this is why math is important. this is why science is important. this is why i need to study and get good grades.
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>> every one of my friends are going for high school and having teenage experiences. i'm here living for my life. >> you need to know that there's challenges and the economy and the job market is a concern. >> i hope to give her a glimpse into the business world, into a global economy. >> i trust her to guide me through this whole years of me being here in p-tech. because if we didn't have a mentor, we wouldn't be able to get out there and exactly know what to do. >> and p-tech is hearing praise from the white house. president obama talked up the school at a town hall meeting on jobs for its focus on technology and also its open admissions process. there's no test or minimum gpa required to get in. school is for those who want to learn technology, get a degree .later on get a job. expect to see more of this type of school. earlier this month, chicago mayor rahm emanuel announced his city will be developing the same concept for chicago public schools, as well. it's all about finding solutions


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